oil and gas
RUSSEL METALS $23.29 (Toronto symbol RUS; TSINetwork Rating: Speculative)(905-819-7777; www.russelmetals.com; Shares outstanding: 61.7 million; Market cap: $1.4 billion; Dividend yield: 6.5%) has completed its acquisition of Western Fiberglass Pipe Sales for an undisclosed amount.
Western Fiberglass is a leading distributor of fibreglass pipe for the oil and gas industry. It serves Western Canada through offices in Estevan, Saskatchewan, and Red Deer, Alberta.
The acquisition will add just $30 million to Russel’s annual revenue of $3.9 billion. However, it lets it offer oil and gas customers fibreglass pipe as an alternative to steel. The company feels this could help them save on installation costs and maintenance while improving flow capacity and increasing service life.
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Western Fiberglass is a leading distributor of fibreglass pipe for the oil and gas industry. It serves Western Canada through offices in Estevan, Saskatchewan, and Red Deer, Alberta.
The acquisition will add just $30 million to Russel’s annual revenue of $3.9 billion. However, it lets it offer oil and gas customers fibreglass pipe as an alternative to steel. The company feels this could help them save on installation costs and maintenance while improving flow capacity and increasing service life.
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PASON SYSTEMS $22.24 (Toronto symbol PSI; TSINetwork Rating: Speculative)(403-301-3400; www.pason.com; Shares outstanding: 83.6 million; Market cap: $1.9 billion; Dividend yield: 3.1%) rents equipment for monitoring and managing land-based oil rigs. It also provides communication systems clients use to remotely collect data from their drilling operations. Pason serves oil and gas firms and drilling contractors throughout Canada, the U.S., Mexico and Argentina.
In the three months ended March 31, 2015, the company’s revenue fell 19.3%, to $99.4 million from $123.2 million a year earlier. A rise in the U.S. dollar only partly offset an industry-wide slowdown in oil and gas drilling.
The company earned $14.2 million, or $0.17 a share, in the latest quarter, down from $20.8 million, or $0.25 a year earlier. The lower revenue was the main reason for the decline. Cash flow per share fell 23.5%, to $0.52 from $0.68.
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In the three months ended March 31, 2015, the company’s revenue fell 19.3%, to $99.4 million from $123.2 million a year earlier. A rise in the U.S. dollar only partly offset an industry-wide slowdown in oil and gas drilling.
The company earned $14.2 million, or $0.17 a share, in the latest quarter, down from $20.8 million, or $0.25 a year earlier. The lower revenue was the main reason for the decline. Cash flow per share fell 23.5%, to $0.52 from $0.68.
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COMPUTER MODELLING GROUP $12.85 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgl.ca; Shares outstanding: 78.5 million; Market cap: $1.0 billion; Dividend yield: 3.1%) sells software and services that help conventional oil and gas producers create 3-D models of reservoirs. That lets them squeeze more out of those reservoirs using advanced recovery techniques, such as injecting steam or chemicals. Typically, only 25% to 30% of oil and gas is recovered during primary production.
Unconventional producers using hydraulic fracturing, or fracking, of oil and gas-bearing shale can also use Computer Modelling’s software to determine optimal drilling locations and depths.
In the three months ended March 31, 2015, the company’s revenue rose 2.0%, to $20.4 million from $20.0 million a year earlier. Software licensing revenue (89% of the total) rose 2.8%, and consulting and professional services revenue (11%) gained 9.6%.
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Unconventional producers using hydraulic fracturing, or fracking, of oil and gas-bearing shale can also use Computer Modelling’s software to determine optimal drilling locations and depths.
In the three months ended March 31, 2015, the company’s revenue rose 2.0%, to $20.4 million from $20.0 million a year earlier. Software licensing revenue (89% of the total) rose 2.8%, and consulting and professional services revenue (11%) gained 9.6%.
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MENTOR GRAPHICS CORP., $26.11, symbol MENT on Nasdaq, makes technology for improving the design of electronic products and speeding up their development. For example, Mentor’s software lets automakers use less wiring in a car, identify potential safety issues and minimize electromagnetic effects on sensitive components. In the three months ended April 30, 2015, the company’s revenue rose 7.9%, to $272.1 million from $252.2 million a year earlier. Excluding one-time items, earnings per share jumped sharply, to $0.28 from $0.11, far exceeding the consensus estimate of $0.18. Sales to the auto industry were very strong, and the company continues to cut costs....
PENGROWTH ENERGY CORP. $3.74 (Toronto symbol PGF; Aggressive Growth and Income Portfolios, Resources sector; Shares outstanding: 538.0 million; Market cap: $2.0 billion; Price-to-sales ratio: 1.7; Dividend yield: 6.4%; TSINetwork Rating: Average; www.pengrowth.com) recently started up its Lindbergh oil sands project in eastern Alberta, which should produce 16,000 barrels a day by the end of 2015.
The company has shut down less profitable wells in response to weak oil and gas prices. That’s why its average production fell 7.7% in the first quarter of 2015, to 69,334 barrels a day (52% oil and liquids, 48% gas) from 75,102 a year earlier. Without unusual items, Pengrowth earned $64.8 million, compared to a loss of $2.8 million. Cash flow per share fell 22.2%, to $0.21 from $0.27.
For the remainder of 2015, the company has hedged 78% of its oil production at $93.87 (Canadian) a barrel, well above today’s price of $60.16 U.S. It has also hedged 57% of its gas output at $3.72 (Canadian) per thousand cubic feet, compared to the current price of $2.94 U.S. The company’s hedges were worth $354.3 million as of March 31, 2015.
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The company has shut down less profitable wells in response to weak oil and gas prices. That’s why its average production fell 7.7% in the first quarter of 2015, to 69,334 barrels a day (52% oil and liquids, 48% gas) from 75,102 a year earlier. Without unusual items, Pengrowth earned $64.8 million, compared to a loss of $2.8 million. Cash flow per share fell 22.2%, to $0.21 from $0.27.
For the remainder of 2015, the company has hedged 78% of its oil production at $93.87 (Canadian) a barrel, well above today’s price of $60.16 U.S. It has also hedged 57% of its gas output at $3.72 (Canadian) per thousand cubic feet, compared to the current price of $2.94 U.S. The company’s hedges were worth $354.3 million as of March 31, 2015.
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ENBRIDGE INC. $61 (Toronto symbol ENB; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 855.0 million; Market cap: $52.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.enbridge.com) gets 90% of its revenue from pipelines that pump oil and natural gas from Western Canada to Eastern Canada and the U.S. The remaining 10% mainly comes from distributing gas to 2.1 million consumers in Ontario, Quebec, New Brunswick and New York State.
The company plans to spend $44 billion on new pipelines and expansions between 2014 and 2018. It completed $9.8 billion worth of that total in 2014 and expects to finish another $8.7 billion worth this year. Enbridge has already secured shipping contracts for $34 billion worth of these projects, which cuts its risk.
These outlays exclude the $6.5-billion Northern Gateway pipeline, which would pump crude from Alberta to the B.C. coast. Regulators have approved the line, but it still faces a number of political and other hurdles. If Enbridge decides to build Northern Gateway, it could begin operating in 2019.
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The company plans to spend $44 billion on new pipelines and expansions between 2014 and 2018. It completed $9.8 billion worth of that total in 2014 and expects to finish another $8.7 billion worth this year. Enbridge has already secured shipping contracts for $34 billion worth of these projects, which cuts its risk.
These outlays exclude the $6.5-billion Northern Gateway pipeline, which would pump crude from Alberta to the B.C. coast. Regulators have approved the line, but it still faces a number of political and other hurdles. If Enbridge decides to build Northern Gateway, it could begin operating in 2019.
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AIMIA INC, $14.19, symbol AIM on Toronto, owns and operates Aeroplan, Canada’s largest loyalty program, with over 4.8 million members who collect Aeroplan miles from participating companies. Members can exchange miles for flights, car rentals, hotel rooms and merchandise. The company also owns Nectar, the U.K.’s biggest loyalty program. In addition, it has interests in Air Miles Middle East and Nectar Italia, as well as Club Premier, Mexico’s leading loyalty program. On January 1, 2014, TD Bank replaced CIBC as Aeroplan’s main credit card issuer. Under a 10-year deal, TD is now launching new cards under the Aeroplan banner, including cards for frequent flyers and small businesses. The agreement also let CIBC hang on to Aeroplan accounts held by customers who also bank at CIBC, which was about half of the Aeroplan portfolio....
BOMBARDIER INC., Toronto symbols BBD.A $2.52 and BBD.B $2.47, plans to cut production of its Global 5000 and 6000 business jets. That’s partly because economic sanctions have hurt sales in Russia. Demand has also weakened in China and Latin America. The company will replace these planes with newer, larger versions called the Global 7000 and 8000 in 2016 and 2017. That will help it compete with new models from Gulfstream Aerospace and Dassault Aviation. As a result, Bombardier will lay off 1,800 employees (about 3% of its workforce) at its plants in Toronto, Montreal and Belfast, Northern Ireland. It didn’t say how much it expects to pay in severance and other costs....
The near-term direction of oil and gas prices remains uncertain, so we think the best way to cut risk is to look for companies with rising production that are trading at reasonable multiples to cash flow. Here are two with sound long-term prospects. DEVON ENERGY CORP. $65.82 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 411.0 million; Market cap: $26.6 billion; Dividend yield: 1.5%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 40% gas and 60% oil. The company narrowed its focus with its July 2014 sale of some of its properties to Linn Energy for $2.3 billion. The deal included holdings in the Rockies, the onshore Gulf Coast and the Mid-Continent region (which includes Oklahoma, Kansas and Texas)....
TOROMONT INDUSTRIES LTD. $31.87 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667- 5511; www.toromont.com; Shares outstanding: 77.5 million; Market cap: $2.5 billion; Dividend yield: 2.1%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division. The company completed the spinoff of Enerflex Ltd. (see right) in 2011. Shareholders received shares of both the new Toromont Industries and Enerflex. In the three months ended March 31, 2015, revenue rose 9.1%, to $340.2 million from $311.7 million a year earlier. Earnings gained 8.1%, to $20.1 million, or $0.26 a share, from $18.6 million or $0.24. The first quarter is typically Toromont’s slowest because of winter shutdowns in the construction industry....